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When Spotify laid off more than 1,500 workers—17% of staff—ahead of the holidays in December 2023, I had written that the company would “likely see backlash” that could result in decreased productivity.
Although the streaming platform saw record first-quarter profits, the company fell short in hitting its Q1 guidance on profitability and month-to-month active user growth.
In the company’s earnings call this week, Spotify CEO Daniel Ek told investors that the impact of the December workforce reduction resulted in “significant” challenges.
“Although there’s no question that it was the right strategic decision, it did disrupt our day-to-day operations more than we anticipated,” Ek acknowledged.
The Spotify CEO wasn’t alone in making job cuts last year. Nearly 1,200 tech companies downsized in 2023, according to Layoffs.fyi, with Amazon, Twilio, Zulily, Chewy and others also trimming headcount right before the winter holidays.
Rightsizing The Company
In a December email to employees, Ek attributed his decision to reduce his workforce to slowing economic growth and expensive capital. The chief executive noted that the streaming platform is “not an exception to these realities” and needed to make this tough call to ensure his company is “rightsized for the challenges ahead.”
He also found that employees weren’t contributing to meaningful work, writing, “Today, we still have too many people dedicated to supporting work and even doing work around the work rather than contributing to opportunities with real impact. More people need to be focused on delivering for our key stakeholders–creators and consumers. In two words, we have to become relentlessly resourceful.”
Additionally, the music and podcast streaming industry is struggling to achieve profitability due to high content licensing costs.
Following the news of the job cuts, it was also announced that CFO Paul Vogel would depart the company in March 2024.
Spotify previously terminated around 600 employees in January 2023, and then conducted another round of layoffs in June, eliminating approximately 200 jobs.
In Tuesday’s earnings call, Ek reassured investors that while it took some time for the company to find its footing, “I think we’re back on track and I expect to continue improving on our execution throughout the year getting us to an even better place than we’ve ever been.”
Spotify did not return request for comment at the time of publication.
Source: Forbes
